CANADA PROVINCE OF QUÉBEC DISTRICT OF MONTRÉAL
S U P E R I O R C O U R T Commercial Division
File: No: 500-11-048114-157
IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED:
BLOOM LAKE GENERAL PARTNER LIMITED, QUINTO MINING CORPORATION, 8568391 CANADA LIMITED, CLIFFS QUÉBEC IRON MINING ULC, WABUSH IRON CO. LIMITED AND WABUSH RESOURCES INC.
Petitioners
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THE BLOOM LAKE IRON ORE MINE LIMITED PARTNERSHIP, BLOOM LAKE RAILWAY COMPANY LIMITED, WABUSH MINES, ARNAUD RAILWAY COMPANY AND WABUSH LAKE RAILWAY COMPANY LIMITED
Mises-en-cause
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FTI CONSULTING CANADA INC.
Monitor
TWENTY-FIFTH REPORT TO THE COURT SUBMITTED BY FTI CONSULTING CANADA INC.,
IN ITS CAPACITY AS MONITOR
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INTRODUCTION
1. On January 27, 2015, Bloom Lake General Partner Limited (“Bloom Lake
GP”), Quinto Mining Corporation, 8568391 Canada Limited and Cliffs
Québec Iron Mining ULC (“CQIM”) (collectively, the “Bloom Lake
Petitioners”) sought and obtained an initial order (as amended, restated or
rectified from time to time, the “Bloom Lake Initial Order”) under the
Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended
(the “CCAA”) from the Superior Court of Québec (the “Court”), providing
for, inter alia, a stay of proceedings against the Bloom Lake Petitioners until
February 26, 2015, (the “Bloom Lake Stay Period”) and appointing FTI
Consulting Canada Inc. as monitor (the “Monitor”). The relief granted in the
Bloom Lake Initial Order was also extended to The Bloom Lake Iron Ore
Mine Limited Partnership (“Bloom Lake LP”) and Bloom Lake Railway
Company Limited (together with Bloom Lake LP, the “Bloom Lake Mises-
en-Cause” and together with the Bloom Lake Petitioners, the “Bloom Lake
CCAA Parties”). The proceedings commenced under the CCAA by the
Bloom Lake CCAA Parties will be referred to herein as the “CCAA
Proceedings”.
2. On May 20, 2015, the CCAA Proceedings were extended to include Wabush
Iron Co. Limited (“WICL”), Wabush Resources Inc. (“WRI” and together
with WICL, the “Wabush Petitioners”), Wabush Mines, Arnaud Railway
Company (“Arnaud”) and Wabush Lake Railway Company Limited
(collectively the “Wabush Mises-en-Cause” and together with the Wabush
Petitioners, the “Wabush CCAA Parties”) pursuant to an initial order (as
amended, restated or rectified from time to time, the “Wabush Initial
Order”) providing for, inter alia, a stay of proceedings against the Wabush
CCAA Parties until June 19, 2015, (the “Wabush Stay Period”). The Bloom
Lake CCAA Parties and the Wabush CCAA Parties will be referred to
collectively herein as the “CCAA Parties”.
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3. The Bloom Lake Stay Period and the Wabush Stay Period (together, the “Stay
Period”) have been extended from time to time and currently expire on
January 31, 2017.
4. On April 17, 2015, Mr. Justice Hamilton J.S.C. granted an Order approving,
as it relates to the Bloom Lake CCAA Parties, a sale and investor solicitation
process (as may be amended from time to time, the “SISP”) involving the
business and assets of the Bloom Lake CCAA Parties. The SISP was
subsequently amended and restated to reflect the inclusion of the Wabush
CCAA Parties in the CCAA Proceedings and was approved nunc pro tunc as
it relates to the Wabush CCAA Parties pursuant to an Order granted June 9,
2015 (together with the April 17, 2015 Order, the “SISP Order”).
5. On January 27, 2016, the Court approved the sale by the Bloom Lake CCAA
Parties to Québec Iron Ore (“QIO”) of substantially all of the assets relating
to the Bloom Lake Mine (the “Bloom Lake Transaction”), but excluding
certain equipment described in schedule I of the asset purchase agreement
between the Bloom Lake CCAA Parties and QIO (the “QIO Excluded
Equipment”).
6. On September 9, 2016, the Vendors filed a motion (the “830E Motion”),
originally returnable on September 23, 2016, seeking approval to sell 14
Komatsu 830E Haul Trucks to Ritchie Bros Auctioneers (Canada) Ltd.
(“RBA”), five (5) of such Komatsu 830E Haul Trucks being located at the
Bloom Lake Mine and forming part of the QIO Excluded Equipment (the
“Bloom Lake 830E Purchased Assets”) and the balance of the Komatsu
830E Haul Trucks being located at the Wabush Mine (the “Wabush 830E
Purchased Assets”).
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7. On September 20, 2016, QIO filed a De Bene Esse Notice of Objection (the
“QIO Objection”) in respect of the 830E Motion seeking a declaration from
the Court that the tires and rims attached to the Bloom Lake 830E Purchased
Assets were acquired as part of the Bloom Lake Transaction. The 830E
Motion was adjourned to October 21, 2016 with respect to the Bloom Lake
830E Purchased Assets and approved for the Wabush 830E Purchased Assets.
8. On October 19, 2016, QIO withdrew its objection to the 830E Motion, but
reserved its rights in respect of any future motions for the approval of the sale
of QIO Excluded Equipment.
9. On October 21, 2016, the 830E Motion was approved with respect to the
Bloom Lake 830E Purchased Assets and the transaction was closed later that
day.
10. To date, the Monitor has filed twenty-four reports in respect of various aspects
of the CCAA Proceedings. The purpose of this, the Monitor’s Twenty-Fifth
Report (this “Report”), is to provide information to the Court with respect to:
(a) The request by Bloom Lake LP, WRI and WICL (the “Vendors”) for
an approval and vesting order (the “Third RBA AVO”) contemplated
in the agreement dated as of October 11th, 2016 (the “Third RBA
APA”) by and between the Vendors and RBA, pursuant to which RBA
will acquire specific major mobile mining equipment and vehicles
located at the Bloom Lake Mine and Scully Mine including:
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(i) 7 Komatsu 930E haul trucks, a Komatsu PC4000-6 Front
Shovel, a Caterpillar MD6640 Rotary Blast Hole Drill, a
Caterpillar 7495 Electric Rope Shovel including a bucket
and related parts and accessories and a 7495 training
simulator module, and all the accessories, tires and rims
attached thereto, located at the Bloom Lake Mine and as
more particularly described in Schedule "B" to the Third
RBA APA (the "Bloom Lake LP Equipment");
(ii) 4 Letourneau L-1850 Wheel Loaders, a Komatsu PC5500-
6E Front Shovel, a Komatsu PC5500 Front Shovel, a
Komatsu WA600-6 Wheel Loader, a Bucyrus Erie
MD6640 49RH Crawler Blast Hole Drill and Komatsu
D375A-6 Crawler Tractor, and all the accessories, tires and
rims attached thereto, located at the Scully Mine and as
more particularly described in Schedule "B-1" to the Third
RBA APA (the "Wabush Scully Mine Equipment"); and
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(iii) inter alia, 19 Ford F250 trucks, a Kenworth T800 Flatbed
Truck with crane, a Sterling RS701 00 Boom Truck, a
Kenworth T370 Service truck and a Caterpillar 988F Wheel
Loader, and all the accessories, tires and rims attached
thereto, located at the Bloom Lake Mine and as more
particularly described in Schedule "B-1" to the Third RBA
APA (the "Wabush Bloom Lake Mine Equipment" and
together with the Bloom Lake LP Equipment and the
Wabush Scully Mine Equipment, the “Purchased Assets”1
and the transaction contemplated herein, the “Third RBA
Transaction”), and to provide the Monitor’s
recommendation thereon; and
(b) The Vendors’ request that information in the Third RBA APA with
respect to the Purchase Price, the allocation of the Purchase Price
amongst the Purchased Assets (the “Purchase Price Allocation”) and
the Deposit, each as defined in the Third RBA APA, be kept
confidential for commercial reasons and the Monitor’s
recommendation thereon.
TERMS OF REFERENCE
11. In preparing this Report, the Monitor has relied upon unaudited financial
information of the CCAA Parties, the CCAA Parties’ books and records,
certain financial information prepared by the CCAA Parties and discussions
with various parties (the “Information”).
12. Except as described in this Report:
1 The Purchased Assets are those assets defined as the September 16 Proposal Assets, other than the railcars, in the Monitor’s 24th Report.
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(a) The Monitor has not audited, reviewed or otherwise attempted to
verify the accuracy or completeness of the Information in a manner
that would comply with Generally Accepted Assurance Standards
pursuant to the Chartered Professional Accountants of Canada
Handbook; and
(b) The Monitor has not examined or reviewed financial forecasts and
projections referred to in this Report in a manner that would comply
with the procedures described in the Chartered Professional
Accountants of Canada Handbook.
13. The Monitor has prepared this Report in connection with the Motion for the
granting of the Third RBA AVO scheduled to be heard on October 28th, 2016.
The Report should not be relied on for other purposes.
14. Future oriented financial information reported or relied on in preparing this
Report is based on management’s assumptions regarding future events; actual
results may vary from forecast and such variations may be material.
15. Unless otherwise stated, all monetary amounts contained herein are expressed
in Canadian Dollars. Capitalized terms not otherwise defined herein have the
meanings defined in the Bloom Lake Initial Order, the Wabush Initial Order
or previous reports of the Monitor.
EXECUTIVE SUMMARY
16. Capitalized terms used in the Executive Summary are as defined in the
relevant section of the Report.
17. The Monitor is of the view that:
(a) The marketing process that resulted in the execution of the Third RBA
APA was fair and reasonable in the circumstances;
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(b) The Third RBA Transaction is the highest and best transaction
resulting from the marketing of the Purchased Assets and the
consideration is fair and reasonable in the circumstances;
(c) The approval of the Third RBA Transaction is in the best interests of
the Vendors’ stakeholders generally, including the secured creditors
holding or asserting security over the Purchased Assets, the
beneficiaries of the CCAA Charges and potential statutory deemed
trust claims; and
(d) Pursuant to the proposed terms of the Third RBA AVO, the net
proceeds of the Third RBA Transaction (following the deduction for
applicable transfer taxes and remittance of any amounts to the
Receiver General for Canada and the Ministère du Revenu (Québec))
will stand in the place and stead of the Purchased Assets, will remain
subject to the CCAA Charges and any statutory deemed trust and will
be held by the Monitor pending further order of the Court. Therefore,
neither the secured creditors holding or asserting security over the
Purchased Assets, the beneficiaries of the CCAA Charges, nor any
beneficiary of a potential statutory deemed trust in respect of the
Wabush Pension Plans, would be prejudiced by the approval of the
Third RBA Transaction.
18. Accordingly, the Monitor supports the Vendors’ request for approval of the
Third RBA Transaction and the granting of the Third RBA AVO.
19. With respect to the Vendors’ request to maintain the Purchase Price, Purchase
Price Allocation and Deposit information confidential, the Monitor notes that
such confidentiality is a requirement of the Third RBA APA and the Monitor
is of the view that such a request is reasonable, justified and appropriate in the
circumstances.
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INDEPENDENT REVIEW OF SECURITY
BLOOM LAKE LP EQUIPMENT
20. As previously reported by the Monitor, in September 2013, CQIM and Bloom
Lake LP entered into a master loan and security agreement with Key
Equipment Finance Inc. ("Key Bank") to finance the acquisition of certain
heavy mining equipment related to the Phase II expansion of the Bloom Lake
Mine (the "Key Bank Facility").
21. The Key Bank Facility consisted of 13 loans totalling $164.8 million in
principal amount, ten (10) of which were advanced to Bloom Lake LP and
three to CQIM.
22. Pursuant to a corporate guaranty dated September 27, 2013, CNR guaranteed
the obligations of the Bloom Lake LP and CQIM under the Key Bank Facility
(the "Corporate Guaranty").
23. Of the loans advanced to Bloom Lake LP, seven (7) were used to finance the
purchase of the Bloom Lake LP Equipment including:
(a) Loan schedule no. 1 dated September 27, 2013 used to finance the
purchase of a Komatsu Super Shovel Model PC400FS Shovel, with 2
17 cubic meter buckets;
(b) Loan schedule no. 3 dated September 27, 2013 used to finance the
purchase of a Caterpillar 7495 Electric Rope Shovel;
(c) Loan schedule no. 6 dated October 25, 2013 used to finance the
purchase of (i) a 59 yd FastFill dipper with 192 inch Spade lip, and (ii)
one Immersive Technologies Pro 3 Transportation Simulator
consisting of a 8’x8’x20’ cargo container and a 8’x8’x10’ storage
cargo container both mounted on a Felling Model FT-36-300017
48’x8’ wide trailer;
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(d) Loan schedule no. 7 dated November 26, 2013 used to finance the
purchase of two (2) Komatsu 930-4SE Electric Dump Trucks,
including accessories and attachments thereto;
(e) Loan schedule no. 8 dated November 26, 2013 used to finance the
purchase of two (2) Komatsu 930-4SE Electric Dump Trucks,
including accessories and attachments thereto;
(f) Loan schedule no. 9 dated November 26, 2013 used to finance the
purchase of three (3) Komatsu 930-4SE Electric Dump Trucks,
including accessories and attachments thereto; and
(g) Loan schedule no. 13 dated December 18, 2013 used to finance the
purchase of a Caterpillar MD6640 Rotary Blasthole Drill, including
accessories and attachments thereto.
24. Between September and December 2013, Key Bank assigned its right, title
and interest under the seven loan schedules described above as follows:
(a) Loan schedule no. 1 to Cole Taylor Equipment Finance, LLC (“Cole
Taylor”) on September 27, 2013;
(b) Loan schedule no. 3 to the Bank of Nova Scotia (“Scotia Bank”) on
September 27, 2013;
(c) Loan schedule no. 6 to Scotia Bank on October 25, 2013;
(d) Loan schedule no. 7 to Bank of the West on November 26, 2013;
(e) Loan schedule no. 8 to BBVA Compass Financial Corporation
(“BBVA”) on November 26, 2013;
(f) Loan scheduled no. 9 to Sun Trust Equipment Finance & Leasing
Corp. (“Sun Trust”) on November 26, 2013; and
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(g) Loan schedule no. 13 to Cole Taylor on December 18, 2013.
25. Between January 2015 and March 2016, CNR paid all amounts owing under
the Corporate Guarantee and received assignments of the rights and interests
in the various loan schedules in respect of the Key Bank Facility or, in the
case of Scotia Bank, was subrogated to their rights and interests. Specifically,
with respect to the Bloom Lake LP Equipment:
(a) On January 4, 2016, CNR, in its capacity as guarantor, paid the
balance of amounts owing under loan schedules nos. 3 and 6 and is
subrogated to the rights and interests of Scotia Bank therein.
(b) On January 25, 2016, Sun Trust assigned its rights and interests in loan
schedule no. 9 to CNR.
(c) On February 19, 2016, Bank of the West assigned its rights and
interests in loan schedule no. 7 to CNR.
(d) On March 4, 2016, BBVA assigned its rights and interests in loan
schedule no. 8 to CNR.
(e) On March 16, 2016, MB Equipment Finance LLC (formerly Cole
Taylor) assigned its rights and interests in loan schedules nos. 1 and 13
to CNR.
26. Previously in these CCAA Proceedings, counsel to the Monitor conducted a
review of the Key Bank Security and delivered its opinion to the Monitor (the
“Key Bank Security Opinion”). Subject to the qualifications and assumptions
set out therein, the Key Bank Security Opinion indicates that the Key Bank
Security over the Bloom Lake LP Equipment is valid and legally enforceable as
against a trustee in bankruptcy.
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27. Counsel to the Monitor has reviewed and delivered its opinion in respect of
CNR’s claim to the Key Bank Security (the “CNR Key Bank Security”)
following the assignment of loan schedules nos. 1, 3, 6, 7, 8, 9 and 13 described
above (the “CNR Key Bank Security Opinion”). Subject to the qualifications
and assumptions set out therein, the CNR Key Bank Security Opinion indicates
that the CNR Key Bank Security in respect of these loan schedules is valid and
enforceable as against a trustee in bankruptcy.
WABUSH SCULLY MINE EQUIPMENT
28. As reported in the Monitor’s 19th report, Cliffs Mining Company (“CMC”), a
related party, filed a secured claim in the Claims Procedure for advances made
to the Wabush CCAA Parties prior to the CCAA Proceedings (the "CMC
Secured Claim" and the related security being the "CMC Security");
29. As reported in the Monitor’s Twenty-First Report, the CMC Security Opinion
opines that the CMC Security, which purports to secure all “equipment” of
WICL and WRI located in Newfoundland and Labrador, is currently only
perfected against those items of equipment properly scheduled in the relevant
documents and for which proper registrations have been made in the
applicable Personal Property Security Registry in Newfoundland.
30. The CMC security documents list certain, but not all, of the Wabush Scully
Mine Equipment (the “Wabush Scully Mine CMC Secured Equipment”)
including:
(a) Komatsu WA600-6 Wheel Loader;
(b) Letourneau L-1850 Wheel Loader;
(c) Komatsu D375A-6 Crawler Tractor;
(d) Komatsu PC5500 Front Shovel; and
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(e) Komatsu PC5500-6E Front Shovel.
31. Accordingly, subject to the qualifications and assumptions set out in the CMC
Security Opinion, the CMC Security is valid and enforceable as against a
trustee in bankruptcy with respect to the Wabush Scully Mine CMC Secured
Equipment.
WABUSH BLOOM LAKE MINE EQUIPMENT
32. While the CMC Security documents cover assets located in Newfoundland
and Labrador and Québec, the Wabush Bloom Lake Mine Equipment is not
specifically listed in the CMC security documents or PPSA registrations.
Therefore, based on the searches carried out by counsel to the Monitor, it does
not appear that the Wabush Bloom Lake Mine Equipment is subject to any
security registrations.
REQUEST FOR THE THIRD RBA AVO
33. Capitalized terms used in this section of this Report not otherwise defined are
as defined in the Third RBA APA, a redacted copy of which is attached hereto
as Appendix A.
THE THIRD RBA APA
34. Pursuant to the Third RBA APA, RBA will purchase the Purchased Assets for
an amount which the Vendors are requesting remains confidential subject to
further order of this Court (the “Purchase Price”). In addition to the
Purchase Price, RBA will pay all applicable transfer taxes.
35. Pursuant to the Third RBA APA, on October 12, 2016 the Purchaser paid a
deposit to the Monitor in an amount equal to 10% of the Purchase Price.
36. The Purchased Assets are being purchased on an “as is, where is” basis and,
pursuant to the Third RBA APA, RBA:
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(a) With respect to the Bloom Lake LP Equipment and the Wabush
Bloom Lake Mine Equipment, shall on Closing execute and deliver an
acknowledgement (“Access Acknowledgement”) agreeing to be
bound to the terms of the access agreement dated April 11, 2016
among, inter alia, the Vendors and the Bloom Lake Mine Purchaser
(“Access Agreement”) for access to the Bloom Lake Mine;
(b) Shall be responsible for removing the Bloom Lake LP Equipment and
the Wabush Bloom Lake Mine Equipment from the Bloom Lake Mine
site, transporting the equipment offsite and supplying all equipment,
personnel and materials required to carry out the foregoing by April
11, 2018 pursuant to and in accordance with the terms of the Access
Agreement or such other access arrangement that RBA may negotiate
with the Bloom Lake Purchaser.
(c) Shall be responsible for removing and transporting the Wabush Scully
Mine Equipment to an area outside of the area of the MFC Sub-Lease
by January 15, 2017, and from any other areas of the Wabush Mine,
within 12 months of the Closing Date, including supplying all
equipment, personnel and materials required to carry out the foregoing
pursuant to and in accordance with the terms of the Third RBA APA
and any access agreement contemplated therein.
(d) Acknowledges that the Vendors shall have no responsibility or liability
of any kind or nature whatsoever in connection with RBA accessing
the Bloom Lake Mine site or the Scully Mine site.
37. The obligation of RBA to complete the Third RBA Transaction is subject to
the following conditions being fulfilled or waived by RBA:
(a) The Third RBA AVO shall have been issued and entered by the Court
and shall not have been vacated, set aside or stayed;
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(b) The Vendors shall have executed and delivered or caused to have been
executed and delivered to RBA at the Closing all the documents
contemplated in Section 8.2 of the Third RBA APA;
(c) During the Interim Period, no Governmental Authority shall have
enacted, issued or promulgated any final or non-appealable Order or
Law which has the effect of:
(i) Making any of the transactions contemplated by the Third
RBA APA illegal; or
(ii) Otherwise prohibiting, preventing or restraining the
consummation of any of the transactions contemplated by
the Third RBA APA.
(d) Each of the representations and warranties contained in Section 4.2 of
the Third RBA APA shall be true and correct in all material respects:
(i) As of the Closing Date as if made on and as of such date; or
(ii) If made as of a date specified therein, as of such date; and
(e) The Vendors shall have performed in all material respects all
covenants, obligations and agreements contained in the Third RBA
APA required to be performed by the Vendors on or before the
Closing.
38. The obligation of the Vendors to complete the Third RBA Transaction is
subject to the following conditions being fulfilled or waived by the Vendors:
(a) The Third RBA AVO shall have been issued and entered by the Court
and shall not have been vacated, set aside or stayed;
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(b) RBA shall have executed and delivered or caused to have been
executed and delivered to the Vendors or the Monitor, as applicable, at
Closing all the documents and payments contemplated in Section 8.3
of the Third RBA APA;
(c) During the Interim Period, no Governmental Authority shall have
enacted, issued or promulgated any final or non-appealable Order or
Law which has the effect of:
(i) Making any of the transactions contemplated by the Third
RBA APA illegal;
(ii) Otherwise prohibiting, preventing or restraining the
consummation of any of the transactions contemplated by
the Third RBA APA;
(d) Each of the representations and warranties contained in Section 4.1 of
the Third RBA APA shall be true and correct in all material respects:
(i) As of the Closing Date as if made on and as of such date; or
(ii) If made as of a date specified therein, as of such date; and
(e) RBA shall have performed in all material respects all covenants,
obligations and agreements contained in the Third RBA APA required
to be performed by RBA on or before the Closing.
39. The Third RBA APA may be terminated on or prior to the Closing Date as set
out in section 10.1 of the Third RBA APA:
(a) By mutual written agreement of the Vendors and RBA, and, if
following the approval of the Third RBA Transaction by the Court,
with the consent of the Monitor, or approval of the Court;
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(b) By written notice from RBA if before Closing all, or substantially all,
of the Purchased Assets are subject to a Casualty;
(c) By either RBA or the Vendors if:
(i) The Third RBA AVO has not been obtained by November
15, 2016, or such later date as the Parties may agree; or
(ii) The Court declines to grant the Third RBA AVO for
reasons other than a breach of the Third RBA APA by the
Vendors or RBA;
(d) By RBA if there has been a material breach by the Vendors of any
representation, warranty or covenant in the Third RBA APA that has
not been waived by RBA, and:
(i) Such breach is not curable and has rendered the satisfaction
of any condition in section 9.1 of the Third RBA APA
impossible by the Outside Date; or
(ii) Such breach is curable, but has not been cured within ten
(10) days following the date upon which the Vendors
received notice of the breach;
(e) By either RBA or the Vendors if Closing has not occurred by the
Outside Date, being five (5) Business Days following receipt of the
Approval and Vesting Order, and the failure to close is not caused by
RBA’s or the Vendors’ breach of the Third RBA APA, respectively; or
(f) By the Vendors if there has been a material breach by RBA of any
representation, warranty or covenant in the Third RBA APA that has
not been waived by the Vendors, and:
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(i) Such breach is not curable and has rendered the satisfaction
of any condition in section 9.2 impossible by the Outside
Date; or
(ii) If such breach is curable, but has not been cured within ten
(10) days following the date upon which RBA received
notice of the breach.
THE MONITOR’S COMMENTS AND RECOMMENDATION
40. Section 36(1) of the CCAA states:
“36(1) Restriction on disposition of business assets - A
debtor company in respect of which an order has been
made under this Act may not sell or otherwise dispose of
assets outside the ordinary course of business unless
authorized to do so by a court. Despite any requirement for
shareholder approval, including one under federal or
provincial law, the court may authorize the sale or
disposition even if shareholder approval was not obtained.”
41. Section 36(3) of the CCAA states:
“(3) Factors to be considered - In deciding whether to
grant the authorization, the court is to consider, among
other things,
(a) whether the process leading to the proposed sale or
disposition was reasonable in the circumstances;
(b) whether the monitor approved the process leading to the
proposed sale or disposition;
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(c) whether the monitor filed with the court a report stating
that in their opinion the sale or disposition would be more
beneficial to the creditors than a sale or disposition under a
bankruptcy;
(d) the extent to which the creditors were consulted;
(e) the effects of the proposed sale or disposition on the
creditors and other interested parties; and
(f) whether the consideration to be received for the assets is
reasonable and fair, taking into account their market value.”
Reasonableness of the Process Leading to the Proposed Sale
42. The Purchased Assets were made available for sale in the SISP and during a
parallel process launched on or around the date of the SISP where the Monitor
sought liquidation proposals for the CCAA Parties’ assets and inventories.
43. As the Court is aware, the Wabush CCAA Parties had been in discussions
with an interested party with respect to a potential sale of the Wabush Mine.
Although the interested party had terminated discussions in May 2016, it
subsequently re-opened discussions but had informed the Monitor that any
proposal would exclude major mobile equipment2. Accordingly, the CCAA
Parties, in consultation with the Monitor, proceeded to seek new proposals for
the liquidation of the remaining assets at the Bloom Lake Mine and the major
mobile equipment at the Wabush Mine.
2 See paragraphs 60 and 61 of the Monitor’s 24 report.
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44. To that end, on August 18, 2016, the Monitor, on behalf of the CCAA Parties,
sent an email to 88 interested parties including equipment brokers, end-
users/operators and other interested parties that had participated in the
liquidation sales process, or who had expressed an interest in some or all of
the assets of the CCAA Parties during the CCAA Proceedings, requesting
final and best offers on the Bloom Lake LP Equipment, the Wabush Bloom
Lake Mine Equipment, the Wabush Scully Mine Equipment, and the 564
remaining railcars (collectively, the “September 16 Proposal Assets” and the
request for proposals being the “September 16 Request for Proposals”).
Pursuant to this renewed call for proposals, the deadline for submitting
proposals was September 16, 2016 (the “September 16 Proposal Deadline”).
45. On or before the September 16 Proposal Deadline, the Monitor received 16
proposals from 11 interested parties. Of the proposals received, three were for
all, or substantially all, of the September 16 Proposal Assets, other than the
remaining railcars, with the remaining proposals for selected pieces of
equipment.
46. The RBA proposal submitted by the September 16 Proposal Deadline
included all of the September 16 Proposal Assets, other than the remaining
railcars (the “Initial RBA Proposal”).
47. The proposals received were reviewed by the CCAA Parties and the Monitor.
In the business judgement of the CCAA Parties, the Initial RBA Proposal was
determined to be the highest and best proposal compared to any other
proposal, or combination of proposals received and was accepted, subject to
negotiation of definitive documentation and Court approval.
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48. Following the acceptance of the Initial RBA Proposal, it was discovered that
one of the assets listed in the Initial RBA Proposal had been included in the
assets sold to the Bloom Lake Purchaser pursuant to the Bloom Lake
Transaction and should not have been included in the September 16 Proposal
Assets. Accordingly, RBA was requested to revise their proposal to exclude
that asset. On September 21, 2016, RBA submitted a revised proposal for the
Purchased Assets (the "Revised RBA Proposal"). The Revised RBA
Proposal was still the highest and best proposal received for the September 16
Proposal Assets.
49. Accordingly, the Monitor is of the view that the process that resulted in the
execution of the Third RBA APA was fair and reasonable in the
circumstances.
Monitor’s Approval of the Process
50. The Monitor approved the process that led to the execution of the Third RBA
APA and was actively involved in the execution thereof.
Comparison with Sale in Bankruptcy
51. The Monitor has considered whether the Third RBA Transaction would be
more beneficial to the creditors of the Vendors generally, including creditors
holding security on the Purchased Assets other than the beneficiaries of the
CCAA Charges, than a sale or disposition of the Purchased Assets under a
bankruptcy.
52. Given the SISP, the offers received and the liquidation alternatives available,
the options available for sale or disposition of the Purchased Assets are the
same regardless of whether such sale or disposition is carried out in the
CCAA Proceedings or in a bankruptcy.
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53. As discussed later in this Report, the Monitor is satisfied that the Purchase
Price contemplated in the Third RBA APA is fair and reasonable in the
circumstances and that the approval and completion of the Third RBA
Transaction is in the best interests of the Vendors’ stakeholders generally,
including the creditors holding security on the Purchased Assets. There would
be no prejudice to the beneficiaries of the CCAA Charges from the sale of the
Purchased Assets as the proceeds will stand in the stead of the Purchased
Assets and be held by the Monitor pending further Order of the Court.
54. It is the Monitor’s view that the process to obtain the Third RBA AVO, which
is a condition of the Third RBA APA, and close the Third RBA Transaction
would be the same in both the CCAA Proceedings or a bankruptcy and that
the costs associated therewith would be essentially the same whether the sale
was completed in the CCAA Proceedings or a bankruptcy.
55. However, a sale in bankruptcy would delay and possibly jeopardize the
approval and closing of the Third RBA Transaction as it would be necessary
to first assign the Vendors into bankruptcy or obtain a Bankruptcy Order,
convene a meeting of creditors, appoint inspectors and obtain the approval of
the inspectors for the Third RBA Transaction prior to seeking the Third RBA
AVO. Alternatively, with respect to the assets subject to secured claims, the
secured creditors could seek to have the stay of proceedings lifted and a
receiver appointed to conclude the Third RBA Transaction in respect of the
secured assets which would again delay the completion of the Third RBA
Transaction.
56. Accordingly, it is the Monitor’s view that a sale or disposition of the
Purchased Assets in a bankruptcy would not be more beneficial than the
closing of the Third RBA Transaction in the CCAA Proceedings.
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Consultation with Creditors
57. Other than the beneficiaries of the CCAA Charges, there are no known claims
which would rank in priority to the CNR Key Bank Security over the Bloom
Lake LP Equipment and, accordingly, CNR is the only creditor with an
economic interest in the Bloom Lake LP Equipment. CNR has informed the
Monitor that it consents to the Third RBA Transaction.
58. Other than the beneficiaries of the CCAA Charges, and potential statutory
deemed trust claims in respect of the Wabush Pension Plans, the Monitor is
not aware of any other claims which would rank in priority to the CMC
Security if such security is valid and enforceable, and the Monitor is also not
aware of any other secured claims against the Wabush Scully Mine
Equipment that may be subordinate to the CMC Security if such security is
valid and enforceable. CMC has informed the Monitor that it consents to the
Third RBA Transaction.
59. The Monitor is of the view that the degree of creditor consultation was
appropriate in the circumstances. The Monitor does not consider that any
material change in the outcome of efforts to sell the Purchased Assets would
have resulted from additional creditor consultation.
The Effect of the Proposed Sale on Creditors and Other Interested Parties
60. As noted earlier in this Report, QIO reserved its rights to object to any sale of
QIO Excluded Equipment pending determination of what assets constituted
QIO Excluded Equipment.
61. In the Monitor’s view, all of the Bloom Lake LP Equipment is QIO Excluded
Equipment.
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62. Pursuant to the proposed form of the Third RBA AVO, the proceeds of sale
will stand in the stead of the Purchased Assets and be held by the Monitor
pending further Order of the Court. Accordingly, neither the beneficiaries of
the CCAA Charges, nor any beneficiary of a potential statutory deemed trust
in respect of the Wabush Pension Plans, would be prejudiced by the approval
of the Third RBA Transaction.
63. In the Monitor’s view, no stakeholder would be adversely affected by the
Third RBA Transaction.
Fairness of Consideration
64. At various times during the process to obtain liquidation proposals through the
CCAA Proceedings, proposals were received for some, but not all, of the
Purchased Assets, although none of those proposals advanced beyond the
proposal phase.
65. The Revised RBA Proposal represents the highest and best proposal for the
September 16 Proposal Assets compared to any other proposal, or
combination of proposals received.
66. A comparison of the three proposals received for all, or substantially all, of
the September 16 Proposal Assets, other than the railcars, as well as a pro
forma proposal representing a combination of the highest offers received for
individual pieces of equipment in the remaining proposals, is presented in the
chart below:
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67. Based on the foregoing, the Monitor is of the view that the Purchase Price for
the Purchased Assets is fair and reasonable in the circumstances.
Monitor’s Recommendation
68. The Third RBA Transaction is the highest and best transaction resulting from
the marketing of the Purchased Assets and the Monitor is of the view that the
consideration is fair and reasonable in the circumstances.
69. Accordingly, and based on the foregoing, the Monitor is of the view that the
approval of the Third RBA Transaction is in the best interests of the Vendors’
stakeholders generally, including the creditors holding or asserting security
over the Purchased Assets and the Monitor supports the Vendors’ request for
approval of the Third RBA Transaction and the granting of the Third RBA
AVO.
Second RBA Proposal
Proposal 2 Proposal 3
Pro Forma¹
‐
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
‐ 1 1 2 2 3 3 4 4 5
Total Con
side
ratio
n
$0
Comparison of September 16 Proposals
¹ The Pro Forma proposal consideration represents the combination of the highest proposals for individual pieces of equipment received from the September 16 Request for Proposals.
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REQUEST TO MAINTAIN THE PURCHASE PRICE AND DEPOSIT INFORMATION CONFIDENTIAL
70. In support of its application for the issuance of the Third RBA AVO, the
Vendors filed a copy of the Third RBA APA redacted to remove details with
respect to the Purchase Price, the Purchase Price Allocation and the Deposit.
The Purchaser required that information with respect to the Purchase Price,
the Purchase Price Allocation and the Deposit be redacted from any public
disclosure of the Third RBA Transaction as a condition of entering into the
Third RBA APA as the Purchaser considers this information sensitive for
commercial reasons. The Purchaser is in the business of re-marketing and
selling equipment to third parties, and has indicated that knowledge of the
Purchase Price, the Purchase Price Allocation and/or the Deposit could be
detrimental to any such remarketing efforts. Furthermore, if the Third RBA
Transaction does not close, the Purchased Assets would need to be remarketed
and knowledge of the Purchase Price could be detrimental to any such
remarketing.
71. The Monitor has considered the Vendors’ request that the Purchase Price, the
Purchase Price Allocation and the Deposit information be maintained
confidential and is of the view that it is reasonable, justified and appropriate in
the circumstances.
Appendix A
The Third RBA APA (Redacted)
EXECUTION VERSION
22997855.3
THE BLOOM LAKE IRON ORE MINE LIMITED PARTNERSHIP
- and -
WABUSH RESOURCES INC.
- and -
WABUSH IRON CO. LIMITED
- and -
RITCHIE BROS AUCTIONEERS (CANADA) LTD.
ASSET PURCHASE AGREEMENT
DATED AS OF October 11, 2016
R-8
TABLE OF CONTENTS
Page
22997855.3 - i -
ARTICLE 1 INTERPRETATION
1.1 Definitions ................................................................................................................ 2 1.2 Actions on Non-Business Days ................................................................................ 8 1.3 Currency and Payment Obligations .......................................................................... 8 1.4 Calculation of Time ................................................................................................... 8 1.5 Tender ...................................................................................................................... 8 1.6 Additional Rules of Interpretation .............................................................................. 8 1.7 Schedules ................................................................................................................ 9
ARTICLE 2 PURCHASE OF ASSETS
2.1 Purchase and Sale of Purchased Assets .................................................................. 9
ARTICLE 3 PURCHASE PRICE & TAXES
3.1 Purchase Price ......................................................................................................... 9 3.2 Satisfaction of Purchase Price .................................................................................. 9 3.3 Taxes ......................................................................................................................10 3.4 Section 116 of ITA ...................................................................................................10 3.5 Taxable Québec Property ........................................................................................11 3.6 Allocation of Purchase Price ....................................................................................12
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Purchaser ..................................................13 4.2 Representations and Warranties of the Vendors .....................................................13 4.3 As is, Where is ........................................................................................................14
ARTICLE 5 ACCESS AND REMOVAL OF BLOOM LAKE MINE EQUIPMENT
5.1 Access to Bloom Lake Mine Equipment. .................................................................16 5.2 Removal of Bloom Lake Mine Equipment ................................................................16
ARTICLE 6 6.1 Access to Wabush Scully Mine Equipment ..............................................................17 6.2 Removal of Wabush Scully Mine Equipment ...........................................................17 6.3 Care and Maintenance ............................................................................................18 6.4 Compliance with Laws .............................................................................................19 6.5 Restoration ..............................................................................................................19 6.6 Insurance ................................................................................................................19
TABLE OF CONTENTS (continued)
Page
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ARTICLE 7 COVENANTS
7.1 Target Closing Date ................................................................................................19 7.2 Motion for Approval and Vesting Order ....................................................................19 7.3 Risk of Loss and Casualty .......................................................................................20 7.4 Release ...................................................................................................................20 7.5 Trademarked and Branded Assets ..........................................................................20 7.6 Indemnity .................................................................................................................20
ARTICLE 8 CLOSING ARRANGEMENTS
8.1 Closing ....................................................................................................................21 8.2 Vendors’ Closing Deliveries .....................................................................................21 8.3 Purchaser’s Closing Deliveries ................................................................................21
ARTICLE 9 CONDITIONS OF CLOSING
9.1 Purchaser’s Conditions ............................................................................................22 9.2 Vendors’ Conditions ................................................................................................23 9.3 Monitor’s Certificate .................................................................................................23
ARTICLE 10 TERMINATION
10.1 Grounds for Termination ..........................................................................................24 10.2 Effect of Termination ...............................................................................................25 10.3 Treatment of Deposit ...............................................................................................25
ARTICLE 11 GENERAL
11.1 Survival ...................................................................................................................25 11.2 Expenses ................................................................................................................25 11.3 Public Announcements ............................................................................................26 11.4 Notices ....................................................................................................................26 11.5 Time of Essence ......................................................................................................27 11.6 Further Assurances .................................................................................................27 11.7 Entire Agreement ....................................................................................................28 11.8 Amendment .............................................................................................................28 11.9 Waiver .....................................................................................................................28 11.10 Severability ..............................................................................................................28
TABLE OF CONTENTS (continued)
Page
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11.11 Remedies Cumulative .............................................................................................28 11.12 Governing Law ........................................................................................................28 11.13 Dispute Resolution ..................................................................................................28 11.14 Attornment ...............................................................................................................28 11.15 Successors and Assigns .........................................................................................29 11.16 Assignment .............................................................................................................29 11.17 Monitor’s Capacity ...................................................................................................29 11.18 Third Party Beneficiaries .........................................................................................29 11.19 Counterparts ...........................................................................................................29 11.20 Language ................................................................................................................29
22997855.3
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement dated as of October 11, 2016 is made by and between:
THE BLOOM LAKE IRON ORE MINE LIMITED PARTNERSHIP
(“Bloom Lake LP”)
- and -
WABUSH RESOURCES INC.
(“Wabush Resources”)
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WABUSH IRON CO. LIMITED
(“Wabush Iron” and together with Bloom Lake LP and Wabush Resources, the “Vendors”)
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RITCHIE BROS AUCTIONEERS (CANADA) LTD.
(the “Purchaser”)
RECITALS:
A. Pursuant to an initial order of the Québec Superior Court [Commercial Division] (the “Court”) dated January 27, 2015 (as the same may be amended and restated from time to time) in the proceedings bearing Court File No. 500-11-048114-157 (the “CCAA Proceedings”), Cliffs Québec Iron Mining ULC, Quinto Mining Corporation, 8568391 Canada Limited, Bloom Lake General Partner Limited, the Bloom Lake Railway Company Limited and the Bloom Lake Iron Ore Mine Limited Partnership (collectively, the “Bloom Lake CCAA Parties”) obtained protection from their creditors under the Companies’ Creditors Arrangement Act (Canada) (the “CCAA”) and FTI Consulting Canada Inc. was appointed as monitor in the CCAA Proceedings (in such capacity and not in its personal or corporate capacity, the “Monitor”).
B. By an Order of the Court dated May 20, 2015, Wabush Iron, Wabush Resources, Arnaud Railway Company, Wabush Lake Railway Company Limited and Wabush Mines (collectively, the “Wabush CCAA Parties”) were added to the CCAA Proceedings and obtained protection from their creditors under the CCAA.
C. Pursuant to Orders of the Court dated April 17, 2015 and June 9, 2015 (as each may be amended, restated, supplemented or modified from time to time, the “SISP Orders”), the Vendors were authorized to conduct the sale and investor solicitation process for the property and business of, among others, the Vendors, in accordance with the sale and investor solicitation procedures approved by the Court in the SISP Orders (the “SISP”).
D. Bloom Lake LP, among others, used to operate the business of the iron ore mine and
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22997855.3
processing facility located approximately 13 kilometers north of Fermont, Québec, in the Labrador Trough, known as the Bloom Lake mine (the “Bloom Lake Mine”).
E. Wabush Iron and Wabush Resources, among others, used to operate the business of the iron ore mine and processing facility located north of the Town of Wabush in Newfoundland and Labrador, known as the Wabush mine or the Scully mine (the “Scully Mine”).
F. The Vendors desire to sell, transfer and assign to the Purchaser, and the Purchaser desires to acquire and assume from the Vendors, all of the Vendors’ right, title and interest in and to the Purchased Assets, on the terms and subject to the conditions contained in this Agreement.
G. The transactions contemplated by this Agreement are subject to the approval of the Court and will be consummated pursuant to the Approval and Vesting Order, to be entered by the Court in the CCAA Proceedings.
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by each Party, the Parties agree as follows:
ARTICLE 1 INTERPRETATION
1.1 Definitions. In this Agreement:
“Access Acknowledgement” has the meaning set out in Section 5.1.
“Access Agreement” has the meaning set out in Section 5.1.
“Action” means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity and by or before a Governmental Authority.
“Affiliate” means, with respect to any Person, any other Person who directly or indirectly controls, is controlled by, or is under direct or indirect common control with, such Person, and includes any Person in like relation to an Affiliate. A Person shall be deemed to “control” another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise; and the term “controlled” shall have a similar meaning.
“Agreement” means this Asset Purchase Agreement and all the Schedules attached hereto, as they may be amended, restated or supplemented from time to time in accordance with the terms hereof.
“Applicable Law” means, with respect to any Person, property, transaction, event or other matter, (a) any foreign or domestic constitution, treaty, law, statute, regulation, code, ordinance, principle of common law or equity, rule, municipal by-law, Order or other requirement having the force of law, (b) any policy, practice, protocol, standard or guideline of any Governmental Authority which, although not necessarily having the force of law, is regarded by such Governmental Authority as requiring compliance as if it
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8513146.1
had the force of law (collectively, in the foregoing clauses (a) and (b), “Law”), in each case relating or applicable to such Person, property, transaction, event or other matter and also includes, where appropriate, any interpretation of Law (or any part thereof) by any Person having jurisdiction over it, or charged with its administration or interpretation.
“Approval and Vesting Order” means an order of the Court issued in the CCAA Proceedings, substantially in the form of Schedule “A”, approving all of the transactions contemplated by this Agreement and vesting in the Purchaser all of the Vendors’ right, title and interest in and to all of the Purchased Assets free and clear of all Encumbrances.
“Bloom Bill of Sale” means a bill of sale, in form and substance satisfactory to the Parties, acting reasonably, evidencing the sale to the Purchaser of all of the Vendors’ right, title and interest in and to the Bloom Lake LP Equipment
“Bloom Lake CCAA Parties” has the meaning set out in Recital A.
“Bloom Lake LP” has the meaning set out in the preamble hereto.
“Bloom Lake LP Equipment” means the equipment that is located at the Bloom Lake Mine and described in Schedule “B”, which for greater certainty, includes all attachments thereto, including the accessories, tires and rims attached thereto.
“Bloom Lake Mine” has the meaning set out in the preamble hereto.
“Bloom Lake Mine Equipment” means the Bloom Lake LP Equipment and the Wabush Bloom Lake Mine Equipment.
“Bloom Lake Mine Purchase Agreement” has the meaning set out in Section 5.1.
“Bloom Lake Mine Purchaser” means Québec Iron Ore Inc.
“Bloom Purchase Price” means a portion of the Purchase Price in the amount of [REDACTED], as may be adjusted in accordance with Section 7.3(2).
“Business Day” means any day except Saturday, Sunday or any day on which banks are generally not open for business in the City of Montréal, Québec, the City of Toronto, Ontario, the City of St. John’s, Newfoundland and Labrador, or the City of Cleveland, Ohio.
“Casualty” has the meaning set out in Section 7.3.
“Casualty Assets” has the meaning set out in Section 7.3.
“CCAA” has the meaning set out in Recital A.
“CCAA Parties” means collectively the Bloom Lake CCAA Parties and the Wabush CCAA Parties.
“CCAA Proceedings” has the meaning set out in Recital A.
“Certificate of Compliance” has the meaning set out in Section 3.4(1).
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22997855.3
“Closing” means the completion of the purchase and sale of the Vendors’ right, title and interest in and to the Purchased Assets by the Purchaser in accordance with the provisions of this Agreement.
“Closing Date” means the date on which Closing occurs, which date shall be the Target Closing Date or such other date as may be agreed to in writing by the Parties.
“Closing Time” has the meaning set out in Section 8.1.
“Conditions Certificates” has the meaning set out in Section 9.3.
“Court” has the meaning set out in Recital A.
“CRA” means the Canada Revenue Agency or any successor agency.
“Damages” means any loss, cost, liability, claim, interest, fine, penalty, assessment, Taxes, damages available at law or in equity (including incidental, consequential, special, aggravated, exemplary or punitive damages), expense (including consultant’s and expert’s fees and expenses and reasonable costs, fees and expenses of legal counsel on a full indemnity basis, without reduction for tariff rates or similar reductions and reasonable costs, fees and expenses of investigation, defence or settlement) or diminution in value.
“Deposit” has the meaning set out in Section 3.2(1).
“Encumbrances” means all claims, liabilities (direct, indirect, absolute or contingent), obligations, prior claims, right of retention, liens, security interests, charges, hypothecs, trusts, deemed trusts (statutory or otherwise), judgments, writs of seizure or execution, notices of sale, contractual rights (including purchase options, rights of first refusal, rights of first offer or any other pre-emptive contractual rights), encumbrances, whether or not they have been registered, published or filed and whether secured, unsecured or otherwise.
“Governmental Authority” means:
(a) any domestic or foreign government, whether national, federal, provincial, state, territorial, municipal or local (whether administrative, legislative, executive or otherwise);
(b) any agency, authority, ministry, department, regulatory body, court, central bank, bureau, board or other instrumentality having legislative, judicial, taxing, regulatory, prosecutorial or administrative powers or functions of, or pertaining to, government;
(c) any court, tribunal, commission, individual, arbitrator, arbitration panel or other body having adjudicative, regulatory, judicial, quasi-judicial, administrative or similar functions; and
(d) any other body or entity created under the authority of or otherwise subject to the jurisdiction of any of the foregoing, including any stock or other securities exchange or professional association.
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22997855.3
“GST/HST” means all goods and services tax and harmonized sales tax imposed under Part IX of the Excise Tax Act (Canada).
“Hazardous Materials” means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral, gas, odour, heat, sound, vibration, radiation or combination of them that may impair the natural environment, injure or damage property or animal life or harm or impair the health of any individual and includes any contaminant, waste or substance or material defined, prohibited, regulated or reportable pursuant to any Environmental Law in each case, whether naturally occurring or manmade; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation and polychlorinated biphenyls.
“Interim Period” means the period from the date that this Agreement is entered into by the Parties to the Closing Time.
“ITA” means the Income Tax Act, R.S.C., 1985, c. 1 (5th Supplement).
“Law” has the meaning set out in the definition of “Applicable Law”.
“Legal Proceeding” means any litigation, Action, application, suit, investigation, hearing, claim, complaint, deemed complaint, grievance, civil, administrative, regulatory or criminal, arbitration proceeding or other similar proceeding, before or by any court or other tribunal or Governmental Authority and includes any appeal or review thereof and any application for leave for appeal or review.
“Liability” means, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on the financial statements of such Person.
“Monitor” has the meaning set out in Recital A.
“Monitor’s Certificate” means the certificate, substantially in the form attached as Schedule “A” to the Approval and Vesting Order, to be delivered by the Monitor to the Vendors and the Purchaser on Closing and thereafter filed by the Monitor with the Court certifying that it has received the Conditions Certificates.
“Order” means any order, directive, judgment, decree, injunction, decision, ruling, award or writ of any Governmental Authority.
“Outside Date” means five (5) Business Days following receipt of the Approval and Vesting Order, and, in any event, such Outside Date shall not be later than November 22, 2016, or such other date as the Parties may agree in writing.
“Party” means a party to this Agreement and any reference to a Party includes its successors and permitted assigns and “Parties” means more than one of them.
“Person” is to be broadly interpreted and includes an individual, a corporation, a
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22997855.3
partnership, a trust, an unincorporated organization, a Governmental Authority, and the executors, administrators or other legal representatives of an individual in such capacity.
“Proprietary Marks” has the meaning set out in Section 7.5.
“Purchase Price” has the meaning set out in Section 3.1.
“Purchased Assets” means the right, title and interest of the Vendors in the Bloom Lake LP Equipment and the Wabush Equipment.
“Purchaser” has the meaning set out in the preamble hereto.
“QST” means all Québec sales tax imposed pursuant to the Act respecting the Québec sales tax, R.S.Q. c. T-0.1, as amended.
“Québec Certificate of Compliance” has the meaning set out in Section 3.5(1).
“Relocated Equipment Removal Deadline” means 5:00 p.m. (Newfoundland & Labrador time) on the day that is twelve (12) months after the Closing Date or such later date and/or time as the Parties may agree in writing.
“Relocation Deadline” means 5:00 p.m. (Newfoundland & Labrador time) on January 15, 2017 or such later date and/or time as the Parties may agree in writing.
“Remittance Date” has the meaning set out in Section 3.4(3).
“Removal Activities” has the meaning set out in Section 6.1(1), which, for greater certainty, includes the taking possession of and dismantling, removing and transporting any of the Wabush Equipment off of the Subleased Area and/or the Scully Mine site (other than the Subleased Area).
“Representative” when used with respect to a Person means each director, officer, employee, consultant, subcontractor, financial adviser, legal counsel, accountant and other agent, adviser or representative of that Person.
“Sale Advisor” means Moelis & Company LLC.
“Scully Mine” has the meaning set out in Recital E.
“SISP” has the meaning set out in Recital C.
“SISP Orders” has the meaning set out in Recital C.
“SISP Team” means the CCAA Parties, the Sale Advisor and the Monitor.
“Subleased Area” has the meaning set out in Section 6.2(3).
“Target Closing Date” means three (3) Business Days following receipt of the Approval and Vesting Order, or such other date as the Parties may agree.
“Taxes” means, with respect to any Person, all supranational, national, federal, provincial, state, local or other taxes, including income taxes, mining taxes, branch
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8513146.1
taxes, profits taxes, capital gains taxes, gross receipts taxes, windfall profits taxes, value added taxes, severance taxes, ad valorem taxes, property taxes, capital taxes, net worth taxes, production taxes, sales taxes, use taxes, licence taxes, excise taxes, franchise taxes, environmental taxes, transfer taxes, withholding or similar taxes, payroll taxes, employment taxes, employer health taxes, pension plan premiums and contributions, social security premiums, workers’ compensation premiums, employment insurance or compensation premiums, stamp taxes, occupation taxes, premium taxes, alternative or add-on minimum taxes, GST/HST, QST, customs duties or other taxes of any kind whatsoever imposed or charged by any Governmental Authority, together with any interest, penalties, or additions with respect thereto and any interest in respect of such interest, additions or penalties.
“TAQ” means the Taxation Act (Québec), C.Q.L.R. c. I-3.
“Tax Returns” means all returns, reports, declarations, elections, notices, filings, information returns, and statements in respect of Taxes that are required to be filed with any applicable Governmental Authority, including all amendments, schedules, attachments or supplements thereto and whether in tangible or electronic form.
“Transfer Taxes” means all applicable Taxes, including where applicable, GST/HST and QST payable upon or in connection with the transactions contemplated by this Agreement and any filing, registration, recording or transfer fees payable in connection with the instruments of transfer provided for in this Agreement.
“Vendors” has the meaning set out in the preamble hereto.
“Wabush CCAA Parties” has the meaning set out in Recital B.
“Wabush Equipment” means the Wabush Scully Mine Equipment and the Wabush Bloom Lake Mine Equipment.
“Wabush Bill of Sale” means a bill of sale, in form and substance satisfactory to the Parties, acting reasonably, evidencing the sale to the Purchaser of all of the Vendors’ right, title and interest in and to the Wabush Equipment.
“Wabush Bloom Lake Mine Equipment” means the equipment that is located at the Bloom Lake Mine and described in Schedule “B-1”, which for greater certainty, includes all attachments thereto, including the accessories, tires and rims attached thereto.
“Wabush Purchase Price” means a portion of the Purchase Price in the amount of [REDACTED], as may be adjusted in accordance with Section 7.3(2).
“Wabush Scully Mine Equipment” means the equipment that is located at the Scully Mine and described in Schedule “B-1”, which for greater certainty, includes all attachments thereto, including the accessories, tires and rims attached thereto.
“Wabush Iron” has the meaning set out in the preamble hereto.
“Wabush Resources” has the meaning set out in the preamble hereto.
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22997855.3
1.2 Actions on Non-Business Days. If any payment is required to be made or other action (including the giving of notice) is required to be taken pursuant to this Agreement on a day which is not a Business Day, then such payment or action shall be considered to have been made or taken in compliance with this Agreement if made or taken on the next succeeding Business Day.
1.3 Currency and Payment Obligations. Except as otherwise expressly provided in this Agreement: (a) all dollar amounts referred to in this Agreement are stated in the lawful currency of Canada; and (b) any payment contemplated by this Agreement shall be made by wire transfer of immediately available funds to an account of the Monitor specified by the payee, by cash, by certified cheque or by any other method that provides immediately available funds as agreed to between the Parties, with the consent of the Monitor.
1.4 Calculation of Time. In this Agreement, a period of days shall be deemed to begin on the first day after the event which began the period and to end at 5:00 p.m. Eastern on the last day of the period. If any period of time is to expire hereunder on any day that is not a Business Day, the period shall be deemed to expire at 5:00 p.m. Eastern on the next succeeding Business Day.
1.5 Tender. Any tender of documents or money hereunder may be made upon the Parties or, if so indicated, the Monitor, or their respective counsel.
1.6 Additional Rules of Interpretation.
(1) Gender and Number. In this Agreement, unless the context requires otherwise, words in one gender include all genders and words in the singular include the plural and vice versa.
(2) Headings and Table of Contents. The inclusion in this Agreement of headings of Articles and Sections and the provision of a table of contents are for convenience of reference only and are not intended to be full or precise descriptions of the text to which they refer.
(3) Section References. Unless the context requires otherwise, references in this Agreement to Articles, Sections or Schedules are to Articles or Sections of this Agreement, and Schedules to this Agreement.
(4) Words of Inclusion. Wherever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation” and the words following “include”, “includes” or “including” shall not be considered to set forth an exhaustive list.
(5) References to this Agreement. The words “hereof”, “herein”, “hereto”, “hereunder”, “hereby” and similar expressions shall be construed as referring to this Agreement in its entirety and not to any particular Section or portion of it.
(6) Statute References. Unless otherwise indicated, all references in this Agreement to any statute include the regulations thereunder, in each case as amended, re-enacted, consolidated or replaced from time to time and in the case of any such amendment, re-enactment, consolidation or replacement, reference herein to a particular provision shall be read as referring to such amended, re-enacted, consolidated or replaced provision and also include, unless the context otherwise requires, all applicable guidelines, bulletins or policies made in
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connection therewith.
(7) Document References. All references herein to any agreement (including this Agreement), document or instrument mean such agreement, document or instrument as amended, supplemented, modified, varied, restated or replaced from time to time in accordance with the terms thereof and, unless otherwise specified therein, includes all schedules attached thereto.
1.7 Schedules. The following are the Schedules attached to and incorporated in this Agreement by reference and deemed to be a part hereof:
SCHEDULES Schedule “A” Form of Approval and Vesting Order Schedule “B” Bloom Lake LP Equipment & Allocation of Bloom Purchase Price Schedule “B-1” Wabush Equipment & Allocation of Wabush Purchase Price Schedule “C” Access Acknowledgement Schedule “D” Access Agreement
Unless the context otherwise requires, words and expressions defined in this Agreement will have the same meanings in the Schedules and the interpretation provisions set out in this Agreement apply to the Schedules. Unless the context otherwise requires, or a contrary intention appears, references in the Schedules to a designated Article, Section, or other subdivision refer to the Article, Section, or other subdivision, respectively, of this Agreement.
ARTICLE 2 PURCHASE OF ASSETS
2.1 Purchase and Sale of Purchased Assets. At the Closing Time, on and subject to the terms and conditions of this Agreement and the Approval and Vesting Order, the Vendors shall sell to the Purchaser, and the Purchaser shall purchase from the Vendors, all of the Vendors’ right, title and interest in and to the Purchased Assets, which shall be free and clear of all Encumbrances, to the extent and as provided for in the Approval and Vesting Order.
ARTICLE 3 PURCHASE PRICE & TAXES
3.1 Purchase Price. The consideration payable by the Purchaser to the Vendors for the Vendors’ right, title and interest in and to the Purchased Assets shall be [REDACTED], as may be adjusted in accordance with Section 7.3(2) (the “Purchase Price”).
3.2 Satisfaction of Purchase Price. The Purchase Price shall be paid and satisfied as follows:
(1) the deposit in the amount [REDACTED] which shall be paid by the Purchaser to the Monitor in trust on behalf of the Vendors on execution of this Agreement (the “Deposit”) shall be applied against the Purchase Price on Closing. The Purchaser agrees that it waives any accrued interest earned on the Deposit; and
(2) the balance of the Purchase Price, after crediting the Deposit in Section 3.2(1) above, shall be paid by the Purchaser to the Monitor on Closing.
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3.3 Taxes. In addition to the Purchase Price, the Purchaser shall be liable for and shall, at Closing, pay all applicable Transfer Taxes, except that no QST shall be payable by the Purchaser with respect to the transfer of the Purchased Assets that are zero-rated supplies pursuant to section 197.2 of the Act respecting the Québec sales tax.
3.4 Section 116 of ITA.
(1) Wabush Iron shall take all reasonable steps to obtain and deliver to the Purchaser on or before Closing a certificate of compliance issued by the Minister of National Revenue (Canada) under subsection 116(5.2) of the ITA in respect of its disposition of its interest in the Wabush Equipment. A certificate issued by the Minister of National Revenue (Canada) under subsection 116(5.2) of the ITA in respect of Wabush Iron’s interest in the Wabush Equipment is hereinafter referred to as a “Certificate of Compliance”.
(2) If a Certificate of Compliance is delivered to the Purchaser on or before the Closing, the Purchaser shall be entitled to withhold from the portion of the Wabush Purchase Price allocable to Wabush Iron’s interest in the Wabush Equipment, at Closing fifty percent (50%) of the amount, if any, by which such portion of the Wabush Purchase Price exceeds the certificate limit specified in such Certificate of Compliance. If a Certificate of Compliance is not delivered to the Purchaser on or before the Closing, the Purchaser shall be entitled to withhold from the portion of the Wabush Purchase Price allocable to Wabush Iron’s interest in the Wabush Equipment and payable to the Monitor, in respect of Wabush Iron, at Closing fifty percent (50%) of such portion of the Wabush Purchase Price.
(3) Where the Purchaser has withheld any amount under Section 3.4(2) and Wabush Iron delivers a Certificate of Compliance to the Purchaser after Closing and on or before the twenty-eighth day of the calendar month following the calendar month in which the Closing occurs (the “Remittance Date”), the Purchaser shall remit forthwith to the Receiver General for Canada for the account of Wabush Iron fifty percent (50%) of the amount, if any, by which the portion of the Wabush Purchase Price allocable to Wabush Iron’s interest in the Wabush Equipment and payable to the Monitor, in respect of Wabush Iron, exceeds the certificate limit fixed in such Certificate of Compliance and pay forthwith to the Monitor, in respect of Wabush Iron, any amount that the Purchaser has withheld in respect of Wabush Iron’s interest in the Wabush Equipment in excess of such amount.
(4) Where the Purchaser has withheld any amount under Section 3.4(2) and no Certificate of Compliance has been delivered to the Purchaser on or prior to the Remittance Date, such amount shall be remitted by the Purchaser to the Receiver General for Canada for the account of Wabush Iron in accordance with section 116 of the ITA.
(5) For the avoidance of doubt, the Purchaser shall not remit any amount referred to in Section 3.4(4) to the Receiver General for Canada before the Remittance Date, as such date may be extended pursuant to Section 3.4(6).
(6) Notwithstanding anything to the contrary in this Section 3.4, if prior to the
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Remittance Date, the Purchaser has received a comfort letter issued by the CRA in form and substance satisfactory to the Purchaser, acting reasonably, extending the time period under which the Purchaser is required to remit an amount in respect of the Wabush Purchase Price for the account of Wabush Iron without being subject to interest or penalties, the Purchaser shall not make any remittance to the Receiver General for Canada on the date that would otherwise be the Remittance Date and the Remittance Date shall be extended indefinitely, or until the Purchaser receives notification from the CRA that such comfort letter is no longer in effect.
(7) Notwithstanding anything to the contrary in this Section 3.4, any amounts withheld by the Purchaser pursuant to this Section 3.4 shall be remitted to and held by the Monitor, in trust and invested by the Monitor for the benefit of Wabush Iron in a Canadian dollar-denominated interest bearing deposit account with a Canadian chartered bank listed in Schedule 1 to the Bank Act (Canada) until paid out of trust to the Monitor on behalf of Wabush Iron, or remitted to the Receiver General for Canada for the account of Wabush Iron in accordance with this Section 3.4.
(8) A copy of any Certificate of Compliance, other certificates, notices, comfort letters, correspondence or any other document sent by any Vendor or the Purchaser, or received by any Vendor or the Purchaser, pursuant to this Section 3.4 shall be sent promptly to the Monitor by the applicable Vendor or the Purchaser.
3.5 Taxable Québec Property
(1) Wabush Iron shall take all reasonable steps to obtain and deliver to the Purchaser on or before Closing a certificate of compliance issued by the Ministère du Revenu (Québec) under section 1102.1 of the TAQ in respect of its disposition of its interest in the Wabush Bloom Lake Mine Equipment. A certificate issued by the Ministère du Revenu (Québec) under section 1102.1 of the TAQ in respect of Wabush Iron’s interest in the Wabush Bloom Lake Mine Equipment is hereinafter referred to as a “Québec Certificate of Compliance”.
(2) If a Québec Certificate of Compliance is delivered to the Purchaser on or before the Closing, the Purchaser shall be entitled to withhold from the portion of the Wabush Purchase Price allocable to Wabush Iron’s interest in the Wabush Bloom Lake Mine Equipment and payable to Wabush Iron at Closing thirty percent (30%) of the amount, if any, by which such portion of the Wabush Purchase Price exceeds the certificate limit specified in such certificate. If a Québec Certificate of Compliance is not delivered to the Purchaser on or before the Closing, the Purchaser shall be entitled to withhold from the portion of the Wabush Purchase Price allocable to Wabush Iron’s interest in the Wabush Bloom Lake Mine Equipment and payable to Wabush Iron at Closing thirty percent (30%) of such portion of the Wabush Purchase Price.
(3) Where the Purchaser has withheld any amount under Section 3.5(2) and Wabush Iron delivers a Québec Certificate of Compliance to the Purchaser after Closing and on or before the Remittance Date, the Purchaser shall remit forthwith to the Ministère du Revenu (Québec) for the account of Wabush Iron thirty percent (30%) of the amount, if any, by which the portion of the Wabush Purchase Price allocable to Wabush Iron’s interest in the Wabush Bloom Lake Mine Equipment and payable to Wabush Iron exceeds the certificate limit fixed in
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such Québec Certificate of Compliance unless such certificate indicates that the Purchaser is not obligated to deduct, from the portion of the Wabush Purchase Price allocable to Wabush Iron’s interest in the Wabush Bloom Lake Mine Equipment, the tax payable in accordance with section 1102.2 of the TAQ in which case no amount shall be so remitted. The Purchaser shall pay forthwith to Wabush Iron any amount that the Purchaser has withheld in respect of its interest in the Wabush Bloom Lake Mine Equipment in excess of such amount.
(4) Where the Purchaser has withheld any amount under Section 3.5(2) and no Québec Certificate of Compliance has been delivered to the Purchaser on or prior to the Remittance Date, such amount shall be remitted by the Purchaser to the Ministère du Revenu (Québec) for the account of Wabush Iron in accordance with section 1102.2 of the TAQ.
(5) For the avoidance of doubt, the Purchaser shall not remit any amount referred to in Section 3.5(4) to the Ministère du Revenu (Québec) before the Remittance Date, as such date may be extended pursuant to Section 3.5(6).
(6) Notwithstanding anything to the contrary in this Section 3.5, if prior to the Remittance Date, the Purchaser has received a comfort letter issued by the Ministère du Revenu (Québec) in form and substance satisfactory to the Purchaser, acting reasonably, extending the time period under which the Purchaser is required to remit an amount in respect of the portion of the Wabush Purchase Price allocable to the Wabush Bloom Lake Mine Equipment for the account of Wabush Iron without being subject to interest or penalties, the Purchaser shall not make any remittance to the Ministère du Revenu (Québec) on the date that would otherwise be the Remittance Date and the Remittance Date shall be extended indefinitely, or until the Purchaser receives notification from the Ministère du Revenu (Québec) that such comfort letter is no longer in effect.
(7) Notwithstanding anything to the contrary in this Section 3.5, any amounts withheld by the Purchaser pursuant to this Section 3.5 shall be remitted to and held by the Monitor, in trust and invested by the Monitor for the benefit of Wabush Iron in a Canadian dollar-denominated interest bearing deposit account with a Canadian chartered bank listed in Schedule 1 to the Bank Act (Canada) until released from trust to the Monitor on behalf of Wabush Iron or remitted to the Ministère du Revenu (Québec) for the account of Wabush Iron in accordance with this Section 3.5.
(8) A copy of any Québec Certificate of Compliance, other certificates, notices, comfort letters, correspondence or any other document sent by any Vendor or the Purchaser, or received by any Vendor or the Purchaser, pursuant to this Section 3.5 shall promptly be sent to the Monitor by Wabush Iron or the Purchaser.
3.6 Allocation of Purchase Price. The Purchase Price shall be allocated among the Purchased Assets and the Vendors as set forth on Schedule “B” and Schedule “B-1”. The Parties shall report an allocation of the Purchase Price among the Purchased Assets in a manner entirely consistent with Schedule “B” and Schedule “B-1”, and shall not take any position inconsistent therewith in the filing of any Tax Returns or in the course of any audit by any Governmental Authority, Tax review or Tax proceeding relating to any Tax Returns.
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Purchaser. As a material inducement to the Vendors entering into this Agreement and completing the transactions contemplated by this Agreement and acknowledging that the Vendors are entering into this Agreement in reliance upon the representations and warranties of the Purchaser set out in this Section 4.1, the Purchaser represents and warrants to the Vendors as follows:
(1) Incorporation and Corporate Power. The Purchaser is a corporation incorporated, organized and subsisting under the laws of the jurisdiction of its incorporation. The Purchaser has the corporate power, authority and capacity to execute and deliver this Agreement and all other agreements and instruments to be executed by it as contemplated herein and to perform its obligations under this Agreement and under all such other agreements and instruments.
(2) Authorization by Purchaser. The execution and delivery of this Agreement and all other agreements and instruments to be executed by it as contemplated herein and the completion of the transactions contemplated by this Agreement and all such other agreements and instruments have been duly authorized by all necessary corporate action on the part of the Purchaser.
(3) Approvals. No consent, waiver, authorization or approval of any Person and no declaration to or filing or registration with any Governmental Authority is required in connection with the execution and delivery by the Purchaser of this Agreement or all other agreements and instruments to be executed by the Purchaser or the performance by the Purchaser of its obligations hereunder or thereunder.
(4) Enforceability of Obligations. This Agreement constitutes a valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms. There is no Legal Proceeding in progress, pending against or threatened against or affecting the Purchaser and there are no grounds on which such Legal Proceeding might be commenced and there is no Order outstanding against or affecting the Purchaser which, in any such case, affects adversely or might affect adversely the ability of the Purchaser to enter into this Agreement or to perform its obligations hereunder.
(5) Excise Tax Act. The Purchaser is registered for GST/HST purposes under Part IX of the Excise Tax Act (Canada) and for QST purposes pursuant to the Act respe